Deloitte Canada has reduced its growth projection for Canada’s economy in 2027 by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment comes in response to a recent American ban on specific Canadian imports.
The ongoing trade tensions between Canada and the U.S. are expected to result in a significant economic slowdown towards the end of this year and into early 2027, according to Deloitte’s chief economist, Dawn Desjardins. The impact of billions of dollars in tariffs imposed by the U.S. and Canada’s retaliatory measures will vary across different sectors of the Canadian economy, with some industries facing hardships while others see growth opportunities. Desjardins highlighted the positive influence of the federal government’s financial support, investment strategies, and defense spending on targeted growth sectors.
Deloitte’s latest economic forecast predicts a 1.6 percent GDP growth for Canada in 2027, down from the previously anticipated two percent growth. The firm currently anticipates a 0.9 percent GDP expansion in 2026, a slight improvement from its earlier estimation of 0.7 percent.
The uncertain economic environment, characterized by factors such as potential cost increases, trade friction with major partners, and the prospect of higher interest rates, is leading to a cautious outlook among Canadian businesses and consumers, resulting in a slower growth trajectory, as stated by Desjardins.
In recent developments, the Canada-U.S. trade conflict has escalated from tariffs to outright bans on certain products, with the U.S. halting imports of Canadian alcohol, motorcycles, molasses, and whey products. President Donald Trump expressed confidence in the U.S. stance, predicting a fair deal will be reached with Canada. Trump’s administration also announced plans for a significant U.S. steel plant project in Iowa, citing the effectiveness of tariffs on Canadian imports.
Statistics Canada reported that GDP growth in July remained stagnant compared to the previous month after three consecutive months of expansion. The agency highlighted that the goods-producing and services-producing industries showed mixed performance, with some sectors experiencing growth while others faced declines. The agency’s preliminary estimate for August anticipates a 0.2 percent growth, with the mining and retail sectors offsetting reductions in oil and gas extraction.
Economists like Andrew Grantham from CIBC noted that the flat July economic figure was expected as the economy cooled off from a strong second quarter. The focus now shifts to the impact of the latest tariffs and upcoming economic indicators, such as the September jobs report and October’s inflation data and interest rate policy decision by the Bank of Canada.
Despite the challenging economic landscape, financial experts at RBC foresee the Bank of Canada maintaining interest rates throughout 2026 before gradually increasing them in 2027, with potential risks pointing towards earlier rate hikes based on recent communications from the central bank.